Using a conservative analysis we estimated that Facebook’s IPO will increase property value in the Bay Area by at least 1 billion dollars.

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The business world is frothing at the mouth to know just how much Facebook will be worth when it goes public. From the social media giant’s own lips, it values itself at somewhere in the paltry price range of $77 billion. Other commentators are guessing it’ll go for a cool $100 billion or more.

That’s a large chunk of change that will make a gaggle of 20-somethings rich. It also means these newly minted rich will have more to spend on housing.

Using a conservative analysis we estimated that Facebook’s coming out party will increase property value in trendy Bay Area neighborhoods and cities by $1 to 2 billion.

“Competition to buy listed homes in desirable Bay Area zip codes is already discouraging for the average home buyer.” said Mark Brandemuehl, VP Marketing & Business Development at Movoto. “The Facebook IPO will only add to the millionaires competing to buy a small number of homes and it seems inevitable that prices will be driven up.”

An Expert Opinion

To come up with our estimate, we asked Carole Rodoni, president of Bamboo Consulting a Bay Area real estate expert, how the Facebook IPO would affect the area. Her response, unsurprisingly, was that property prices in hip areas will spike, and that overall property prices will rise.

Rodoni estimated that property value in fashionable areas will increase anywhere from 5 to 10 percent. This is on top of the area’s typical appreciation. She expects this mini housing bubble to last between a year and 18 months.

Rodoni calls these new renters and homebuyers “shuttle babies” because they prefer to move back and forth between areas. It also means these shuttle babies are looking to move to areas “that you can walk and within four blocks you get your whole life.”

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How the Math Works

To figure out how Rodoni’s estimate would translate into a dollar amount the Movoto team divided the trendy Bay Area locations into two parts, cities such as Hillsborough and neighborhoods in San Francisco.

For the cities, we used Census data to calculate the number of owner-occupied households in the area. After learning this figure, we used housing data to calculate the 75th percentile of current home list prices–or, the most valuable homes on the market, which the wealthy are more likely to purchase. We then applied the estimated 5 to 10 percent price increase to homes priced at the 75th percentile and above.

For the San Francisco neighborhoods we used a similar process. We estimated the number of owner-occupied homes and then followed the same method.

A Comparison with Google

One way in which Realtors are gauging how this latest IPO will impact that area is by looking at previous high profile startups going public. A common example would be Google.

In this case, however, any comparison is difficult, mostly because the housing market is vastly different from when the search engine expert hit the stock market.

In the early 2000s, the East Bay saw a tech blowup and the government began a push for homeownership. This made getting a loan much easier, but also fueled the bubble market.

“Everybody wanted to get into the real estate business rather than owning real estate as a home,” Rodoni said. “What happened was from 2000 to 2005 we had this euphoric real estate market.”

The difference is this latest IPO generation aren’t trying to game the system. “These people are wealthy; they have money,” she said. “They are not going to try to day trade real estate.”

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One Comment

Chatter is that Facebook will create 1,000 new millionaires here in the Bay Area – something that will definitely give those markets you mentioned a boost. There is definitely about to be another bubble, though I would blame limited supply far more than Facebook.

Rodoni’s logic here is sound, but in the past she has been more of an industry cheerleader then anything else. Real estate “expert” simply means local brokerages hire her to speak and company events to fire up the troops.